I’ve been thinking about that lawyer Casey Plunket who threatened to leave for Australia over Labour restoring the 39% top tax rate at the stratospheric threshold of $150,000. It means a couple of thousand more tax for the wealthiest Kiwis. Does anyone seriously think anyone will move countries over that? Do we need the kind of people that would?
Lets say our high earner is on $200,000. That’s four times the average wage. You would recognise him if you saw him: he would be a god-like giant lifting the world on his shoulders and doing the work of four mere mortals, which justifies that salary.
How much would Labour’s new tax rate cost him? Only $3,000. That’s partially offset by the $525 he gets from the tax-free zone too, and the GST-off fresh fruit and vegetables. All up, it’s well less than 2% of his net income.
Does a man with net pay of $140,000 a year really care about $2,500 so much that he would go to the cost and trouble of shifting countries, abandoning his job, his friends, his family and other connections? If all that is worth less than $3,000 a year to him, is he really a contributing member of society, or just someone sucking as much as he can out of it?
At the end of the day, the wealthy didn’t flee New Zealand when the 39% rate was introduced, or when much higher rates were in place until the 1980s. In fact, the income of people on the top tax rate exploded under Labour despite this ‘crippling’ tax rate. They didn’t leave then, and they won’t leave in 2012, because a couple of percent here or there in tax simply doesn’t really matter, even to those who protest most loudly that it does.